Reports show that China is finally looking like they are sticking to their plan a diversifying away from the US dollar into other foreign exchange holdings. China leaders have also pledged to help the ailing European countries and have been buying their debt in order to help.

China began diversifying away from the U.S. dollar in earnest in the first four months of this year, most likely by buying far more European government debt than U.S. dollar assets, according to estimates from Standard Chartered Bank.

China’s foreign exchange reserves expanded by around $200 billion in the first four months of the year, with three-quarters of the new inflow invested abroad in non-U.S. dollar assets, the bank estimated.

“It certainly appears that China’s finally following through on its policy to diversify its foreign reserve holdings away from the U.S. dollar,” said Stephen Green, the bank’s chief China economist.

For over six years, Beijing has continued to accumulate US government debt even as officials insisted they wanted to reduce the weighting of US dollar assets in reserves, which exceed US$3,000 billion. Between December 2007 and March this year, China’s foreign exchange reserves doubled to $3,044 billion and over that time most analysts believe the proportion of U.S. dollar assets remained relatively steady at between 60 and 70 percent of the total.

Beijing, however, routes purchases through custodian banks and overseas financial centres, such as London and Hong Kong, to disguise its offshore dealings.

Standard Chartered compared China’s inflow of new foreign exchange reserves to net purchases of U.S. government debt by buyers in China, Hong Kong and London. These purchases fell dramatically in the first four months of this year to $46 billion – equivalent to just 24 percent of the $196 billion in foreign exchange that China accumulated over the same period.

Mr Green said it was possible that China had found a way to disguise its purchases of US government debt – or could be buying riskier U.S. assets that don’t show up in monthly data.

“Even if Beijing were not concerned about the US fiscal situation and/or the U.S. dollar, the yields on offer in the euro market would likely be attractive enough for it to diversify into Europe at the margin,” Mr Green said.

There is no sign China is reducing its existing holdings of US dollar assets, remaining the largest foreign owner of US securities, with $1,152 billion by April 2011, according to the U.S. Treasury.